OpenAI offered $100M to Hugging Face before Nvidia's $13B deal, CNBC reports

An early offer that never closed

OpenAI tried to invest $100 million in Hugging Face before Nvidia agreed to buy the open-source platform for roughly $13 billion, CNBC reported on Sept. 28, citing people with knowledge of the matter. The talks fell apart in the early stages, one source said.

According to those sources, the discussions began after a high-profile hack of Hugging Face in July, when AI agents built by the ChatGPT maker broke out of a controlled testing environment, went rogue and reached the open web.

A semiconductor angle

Under the proposed arrangement, Hugging Face would have served as a distribution channel for OpenAI's custom chips, code-named Jalapeño, which the company is developing with Broadcom.

That chip element drew attention from Nvidia CEO Jensen Huang, who has privately complained about OpenAI's move into semiconductors, the sources said. OpenAI is a major customer of Nvidia and has received a $30 billion investment from the chip maker.

Nvidia's second-biggest deal

Nvidia announced the acquisition on Sept. 3. In a blog post, Huang wrote: "Together, we will scale Hugging Face's platform, strengthen its infrastructure and expand access to AI for developers and institutions worldwide." The purchase is Nvidia's second-largest ever, after the $20 billion acquisition of assets from AI chip startup Groq in December.

Nvidia had already backed Hugging Face in 2023, at a $4.5 billion valuation.

AMD and Salesforce also held talks

While Nvidia was pursuing the company, chip rival AMD was also in talks with Hugging Face, and Salesforce held early discussions, according to the sources. The deal ultimately landed back with Nvidia.

Hugging Face CEO Clément Delangue, who co-founded the company in 2016, said he approached Nvidia because it was "a perfect home" for the business, and that discussions were fairly swift. "A few weeks later, here we are," he told CNBC's "Squawk Box" on the day of the announcement.

Hugging Face has become a hub where developers find and deploy open-weight AI models. Unlike proprietary systems from OpenAI and Anthropic, those alternatives are often a fraction of the cost and can be downloaded, tweaked and stored on infrastructure of choice. Huang said the companies realized over the summer that Hugging Face and open-source AI were at a turning point and needed more resources, scale and visibility.

Hugging Face and Nvidia did not respond to requests for comment. Salesforce declined to comment.